Market Watch

Physical Demand Increasing, People are BTFD

Hard to believe that with all the soundbites that commodities are done, I found it odd that American silver Eagles were going for not $2, not $4, but $6 dollars over spot for physical when looking to make another purchase for myself. This essentially is a wash back to $28 resistance level when looking at the price of silver including spot. The paper market has slowly but surely split from physical and this is simply more proof of it. Found some interesting tidbits on physical demand recently….

Gold sales from Perth Mint, which refines nearly all of the nation’s bullion, have surged after prices plunged, adding to signs that the metal’s slump to a two-year low is spurring increased demand.

“The volume of business that we’re putting through is way in excess of double what we did last week,” Treasurer Nigel Moffatt said, without giving precise figures. “There’s been people running through the gate.”

“There’s been significant sales made as people see this as great value,” Mr Moffatt said. “Gold owners are very reactive to significant market movements.”

The Perth Mint’s sales of gold coins climbed 49 per cent to 97,541 ounces in the three months ended March 31 from a year earlier

China News

Beijing gold store two hours to sell 20,000 grams of gold bullion trading volume of nearly 200 million

YCWB

People have to rush to buy gold, … gold bullion out of stock yesterday, investors yesterday to spend as much as 600 million yuan to buy 20 kilograms of gold bars

The mad pursuit gold insufficiency is not just a game for the rich. Yesterday, the Yangcheng Evening News reporter learned from the East flowers to Bay store, many growers, pork traffickers, fishmonger recently put down his job went straight to the mall to buy gold.

Japan  Reuters and The Age

Some Japanese also harbor fears that the expansionary monetary and fiscal policies dubbed “Abenomics”, coupled with a national debt more than twice as large as annual economic output, could trigger a crisis down the line.

Skeptics about the radical attempt to reflate the economy — or those simply worried that a slide in the yen that began in anticipation of Abe’s election victory last December will continue unabated — are still buying gold, dealers say.

“Investors in gold are convinced that Japan’s fiscal position will get worse,” said Wakako Harada, general manager of Japan’s top bullion house, Tanaka Kikinzoku Kogyo.

“What I see at our counter is that more people are getting worried about Japan. That’s why we are seeing a lot of buying.”

“In contrast this time, we are seeing interest to buy on dips to take exposures to gold,”

“Investors are using this opportunity to buy gold to diversify beyond bonds, stocks and the yen currency as Japan’s fiscal situation could deteriorate.

Japanese individual investors doubled gold purchases yesterday at Tokuriki Honten, the country’s second-largest retailer of the precious metal.

India 

“Gold buyers in India, the world’s biggest consumer, are flocking to stores to buy jewelry and coins, betting a selloff that plunged bullion to a two-year low may be overdone.” Wait, so instead of jumping out off high buildings, Indians are being cool, calm and collected and… buying more? Unpossible. Do they not get CNBC in Mumbai? Apparently not: “My daughter is just six months old, but I think it is never too early to buy gold,” said Sharmila Shirodkar, a 28- year-old housewife, while displaying a new pair of earrings she bought from a store in Mumbai’s Zaveri Bazaar. “I had been asking my husband every day if prices will go down more. I couldn’t wait anymore.”

While the drop in gold prompted investors worldwide to pare holdings in exchange-traded products, surging physical demand in India may help stem the 17 percent slide in prices this year. The plunge after rallying for 12 straight years may make bullion more affordable to Indians, according to Mehul Choksi, chief executive officer of Gitanjali Gems Ltd. (GITG), the nation’s biggest retailer of jewelry and diamonds by sales.

“This is a perfect time to buy as prices will only go up from here,” said Vishal Mehta, a 33-year-old garment dealer, while ordering coins from Choksi V. Naginchand & Co. in Zaveri Bazaar. “I usually buy one gold coin a month, but this time I am buying two.”

Bank of America:

With prices now below $1,500/oz, we expect a pick-up in jewellery demand in the medium term and see considerable pain for miners should prices dip below $1,200/oz. As such, we believe the downside to gold prices may be limited to an additional $150/oz. In fact, we estimate that jewellery demand may become so pronounced by 2016 that prices could trade above $1,500/oz even if investors remain net sellers. Looking at sensitivities from a different angle, investors would need to buy merely 600t of gold to sustain prices at $2,000/oz by 2016, compared to non-commercial purchases of 1,798t in 2012.

US Mint

a record 63,500 ounces, or a whopping 2 tons, of gold were reported sold on April 17th alone, bringing the total sales for the month to a whopping 147,000 ounces or more than the previous two months combined with just half of the month gone.

There is no doubt the price can go down further but this run will hit a resistance level somewhere near the cost of mining it out of the ground.A back plunge can be healthy from time to time. Lets see if this drop makes this asset class healthier.